Absa's share price slid almost 3.5% on Monday as the bank took a proverbial punch to the gut on the back of increasing customer defaults.

Consumers buckling under the financial pressure of increasing interest rates (up 4.75 percentage points since November 2021) and rising inflation have increasingly defaulted on debt from home loans, credit cards, vehicle finance and personal loans.

The net result on Monday showed that Absa's credit impairment charges increased 60% to R8.3-billion over the six months to the end of June.

A large portion of the increase in impairments (defaults) was from credit cards at R2.4-billion, followed by everyday banking at R4.3-billion, another R1.3-billion in the vehicle finance category, and home loans bringing up the rear with defaults of R975-million.

Although headline earnings increased 2% to R11.2-billion, this was largely attributable to earnings for regions in Africa outside South Africa. Locally, headline earnings declined 17% on the back of 60% higher credit impairments.

"Our deliberate diversification strategy stood us in good stead in the first half of 2023, given weaker economic conditions and significant pressure on consumers in South Africa," says Arrie Rautenbach, Absa Group's chief executive officer.

"We will further diversify going forward by deploying resources and capital into attractive growth prospects on the continent, which provides a natural performance hedge for the group while continuing to invest in South Africa."...